California Imposes Further Disclosure Requirements for Local Sales Tax Sharing Agreements

On September 28, 2024, California enacted Assembly Bill 2854, which imposes new disclosure requirements on local agencies (i.e., chartered or general law cities and counties) that have entered into local sales tax sharing agreements with retailers. Generally, pursuant to a local sales tax sharing agreement, a retailer will agree to establish a new sales or fulfillment center in a local jurisdiction and source its sales to that local jurisdiction. In exchange, the local jurisdiction will provide the retailer a rebate on the local sales tax revenue generated for the local jurisdiction.

Assembly Bill 2854, codified at Cal. Rev. & Tax. Code section 7213, requires local agencies to, on or before April 30 of each year, provide the California Department of Tax and Fee Administration with the following information about local sales tax sharing agreements: (1) the parties to the agreement; (2) the total dollar amount of rebated sales tax revenues received by each party in the previous fiscal year and over the life of the agreement; (3) the date of execution and termination of the agreement; and (4) the percentage of the retailer’s sales taxes used to calculate the rebated sales tax revenues received. Localities must post this information on their websites as well. If a city or county fails to comply with these disclosure requirements, it could face penalties up to $920,000 each year.